Wednesday, April 19, 2017

Wednesday, April 19, Morning Global Market Roundup: Reflation Trades Fizzle

By Jamie McGeever
April 19, 2017

Stocks flatlined and gold fell on Wednesday as investors continued to question the 'reflation' trades that had lifted markets since the election of U.S. president Donald Trump in November, while sterling basked in the glow of a six-month high following Tuesday's surprise news of a snap UK election.

Safe-haven bonds dipped slightly but largely held onto most of their recent gains before presidential elections in France and on escalating tensions between the United States and North Korea.

European stocks were flat in early trade .FTEU3, following the 0.6 percent fall in Asian equities outside Japan to a one-month low, .MIAPJ0000PUS while E-mini futures for the S&P 500 ESc1 were all but flat too.

Sterling was just off a six-month peak against the dollar above $1.28 having surged when British Prime Minister Theresa May called an early general election for June 8, seeking to strengthen her party's majority ahead of Brexit negotiations.

"Sterling rallied across the board yesterday on the back of Prime Minister May’s announcement of snap UK elections. The market interpreted the move as an effort to strengthen the prime minister's majority and reinforce a more unified stance for the upcoming negotiations with the EU," Unicredit analysts said in a note on Wednesday.

"Geopolitical tensions are providing strong support to U.S. Treasuries ... (and) in the euro zone Bunds are receiving support from the general decline in risk appetite and uncertainty related to the French presidential election," they added.

Germany's DAX was unchanged at around the 12,000-point mark .GDAXI, and Britain's FTSE 100 fell a further 0.2 percent following Tuesday's 2.5 percent slide, its biggest fall since June last year.

British stocks are vulnerable to a rising pound because more than two thirds of FTSE 100 company earnings are derived from operations overseas. The FTSE has now erased all its gains for the year.

The pound was lording it at $1.2824 GBP= on Wednesday having shattered a month-old trading range with a jump of 2.2 percent overnight. It also cleared the 200-day moving average for the first time since June, putting the squeeze on a raft of speculative short positions.

Wall Street Loses Steam

Earlier in Asia Japan's Nikkei .N225 closed a smidgen higher at 18,432 points, but Shanghai .SSEC extended its recent retreat with a drop of 0.8 percent. The Chinese market has fallen for four straight sessions on concerns over tighter regulations.

The dollar managed to recoup its broader losses in the Asian session, and was flat against a basket of currencies .DXY in early European trading. The euro stood at a three-week high of $1.0736 EUR=.

Against the yen, the dollar was up 0.4 percent at 108.80 JPY= having been as low as 108.39 earlier.

The dollar was undermined in part by an eroding interest rate advantage as U.S. bond yields dived to five-month lows. Yields on 10-year Treasury paper sank to 2.17 percent US10YT=RR, a world away from the 2.629 peak seen in March. They were last up slightly on the day at 2.19 percent.

A run of disappointing U.S. economic data and doubts that the Trump administration will progress with tax cuts have quelled expectations of faster inflation and boosted fixed-income debt.

That, in turn, has taken the steam out of Wall Street. The Dow .DJI fell 0.55 percent on Tuesday, while the S&P 500 .SPX lost 0.29 percent and the Nasdaq .IXIC0.12 percent.

Goldman Sachs (GS.N) lost 4.7 percent in the largest daily drop since June after its earnings missed expectations as trading revenue dropped.

In commodity markets, profit taking nudged gold down 0.4 percent to XAU= $1,287.10 an ounce, and away from Monday's peak of $1,295.42.

Oil prices slipped as U.S. crude stockpiles fell by less than expected and a U.S. government report said shale oil output in May was likely to post the biggest monthly increase in more than two years.

Brent crude LCOc1 was last little changed at $54.93 a barrel, while U.S. crude CLc1 was also steady at $52.42. 

Article Link To Reuters:

Oil Stable As OPEC Says It Is Committed To Rebalance Markets

By Henning Gloystein 
April 19, 2017

Oil prices were stable on Wednesday as OPEC said it was committed to draw down a global supply overhang that has dogged markets since 2014, although bloated U.S. output and inventories still weighed on crude.

Brent crude futures LCOc1 were at $54.92 per barrel, close to its last close.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were also almost unchanged at $52.43 a barrel.

Traders said prices were supported by the Organization of the Petroleum Exporting Countries (OPEC) secretary general, who said the group was committed to restoring market stability by bringing global inventories down to the industry's five-year average.

OPEC, together with other producers like Russia, has agreed to cut output by almost 1.8 million barrels per day (bpd) during the first half of the year to rein in a global fuel supply overhang that has dragged on markets since mid-2014.

A fall in shipments from top exporter Saudi Arabia also lent the market some support.

Saudi crude exports fell to 6.96 million bpd in February, from 7.7 million bpd in January, according to the Joint Organisations Data Initiative (Jodi). Its production, however, rose to 10 million bpd in February, up from 9.75 million bpd in January, as domestic refiners processed more oil.

In politics, U.S. President Donald Trump ordered a review of whether the lifting of sanctions against Iran under a 2015 nuclear deal was in the United States' national security interests.

Many U.S. sanctions against Iran were lifted in late 2015, allowing Tehran to more than double its crude oil exports over 2016, adding to the existing global glut.

Data from the American Petroleum Institute (API) on Tuesday showed that U.S. markets remained bloated.

Although crude inventories fell by 840,000 barrels in the week to April 14 to 531.6 million barrels, they still held near record highs, while gasoline stocks rose by 1.4 million barrels as refinery runs increased by 334,000 bpd, the API said.

The API reported surprisingly that gasoline inventories increased, while crude oil stocks fell by less than expected, said Sukrit Vijayakar, director of energy consultancy Trifecta.

"Unless the (EIA) data shows something drastically different, this report should cause a severe dent in the bullish case (for oil prices)," Vijayakar said.

Official U.S. oil data is expected to be published later on Wednesday by the Energy Information Administration (EIA).

Article Link To Reuters:

Democrats Begin To Wonder: When Do We Win?

For all the roiling anger and energy at the grassroots, the party still fell short in Georgia and Kansas. And Democratic prospects in upcoming elections aren't promising.

By Gabriel Debenedetti
April 19, 2017

As it became clear late Tuesday evening that Jon Ossoff would fall just short of the 50-percent mark in the first round of voting in a suburban Atlanta special election, Democrats back in Washington started leafing through their calendars and asking: When does the winning start?

Ossoff’s moral victory — capturing 48 percent of the vote in a conservative-oriented district — was welcome, but after two successive close-but-no-cigar finishes in House special elections in Georgia and Kansas, a new worry is beginning to set in. For all the anger, energy, and money swirling at the grassroots level, Democrats didn’t manage to pick off the first two Republican-held congressional seats they contended for in the Trump era, and the prospects aren’t markedly better in the next few House races coming up: the Montana race at the end of May, and the South Carolina contest on June 20.

Their best shot at knocking Donald Trump down a peg appears to be Ossoff’s runoff against Republican Karen Handel, also scheduled for June 20. But the Democrat will be an underdog in that contest, when there won’t be a crowded field of Republicans to splinter the vote.

After that, it’ll be another five months before the New Jersey and Virginia elections for governor, leaving some strategists and lawmakers wondering how to keep the furious rank-and-file voters engaged in fueling and funding the party’s comeback — especially given the sky-high expectations that surrounded Ossoff’s ultimately unsuccessful run at the 50-percent threshold that was necessary to win the seat outright.

“The resistance has it right: they are fighting mad, but they find joy in the fight. And so it’s not that anybody should be expected to gloss over the challenges that we have, or be Pollyanna about our situation as a country or as a party,” said Hawaii Sen. Brian Schatz, decrying some of the party’s messaging describing the prospect of an Ossoff loss as devastating. “It’s just that there has to be a sense of momentum that builds over time and that requires that we define our objectives tightly — and that we are prepared to lose more than we win for the time being, but that we understand that we have the vast majority of the American people on our side, and history on our side.”

Democrats have posted a few successes in the opening months of the Trump era. They’ve slowed the new president’s agenda and overperformed in a slew of low-profile state legislative races. By any measure, Ossoff’s strong performance in Georgia and the 20-point swing toward the Democratic nominee in last week’s Kansas special election are impressive accomplishments given the conservative orientation of those districts. But they still fall under the category of loss mitigation, not concrete victories against a president the party loathes.

Now, with Ossoff falling short of an outright win despite an unprecedented surge of campaign cash and national attention — in a district which Hillary Clinton lost by just one point in 2016 — comes the potential for another round of finger-pointing within the party. The worry: that if operatives and voters continue their practice of quietly blaming each other for losses, as they did after a narrow defeat outside of Wichita last week, the current level of runaway enthusiasm and budding trust in the national party leadership could sputter out long before the 2018 midterms.

“Whatever happens over the next few weeks, it’s critical that rank-and-file Democrats feel like the [Democratic Congressional Campaign Committee] left it all on the playing field,” said longtime party strategist Simon Rosenberg, president of the NDN think tank.

After attorney James Thompson came within seven points of winning the race for CIA Director Mike Pompeo’s old seat in Kansas last week, some leading progressive voices, including Vermont Sen. Bernie Sanders, were quick to blame national Democrats for not spending enough time and energy to help Thompson. Since then, DCCC and Democratic National Committee officials have been sure to detail the work they’ve done for the party ahead of Ossoff’s race.

With the approach of a Montana contest that will see national resources poured in while political celebrities like Sanders descend on the state to support candidate Rob Quist, the question Democrats are asking themselves is whether it will be enough — and how to keep the grassroots fires stoked as Trump’s administration passes its first 100 days mark. Trump won Montana by 21 points, after all, and the race in Georgia to replace HHS Secretary Tom Price illustrated that a combination of Republican infighting, the Trump factor and an avalanche of campaign cash still isn’t enough to guarantee Democratic success.

The South Carolina race to replace Budget Director Mick Mulvaney will take place under similarly difficult conditions — in a district Trump won by 18 points, and in a state where he won by 14.

One way to avoid a letdown, some Democrats say, is to train the focus on legislative fights where Democrats have slowed the White House, from its travel ban to the attempt to repeal Obamacare. Party operatives figure pushes like that might be enough to keep the base energized as opportunities to push back on individual policies surface.

“People are responding to Trump, and as long as Trump is in office they will continue to respond,” said Democratic pollster Margie Omero. “There are plenty of other avenues for engagement. Constant meetings and groups popping up all over the country. You have corporate motivated efforts that people are taking to make sure that companies they support have political views that line up with their own. You have the groundswell of activism against [Neil] Gorsuch, and then you have the protests like the tax protest or the climate ones coming down the pike. So there’s lots of opportunity for opposing the president. [Yes,] as long there’s voting people are going to be paying a lot of attention to it. But it goes beyond that.”

The fact that Democrats have picked themselves up off the ground since Election Day to mount a resistance at all creates a positive feedback loop, they believe — pointing to local legislative races as evidence of an optimistic trend.

“The biggest driver of enthusiasm right now is the rejection of Trump and the Trump agenda,” said party strategist Jesse Ferguson, a former top official at the party’s House campaign wing. “There have been far more successes in resisting the Trump administration than anyone would have expected on November 10, whether it’s beating back the health care repeal or some of these special elections in state legislatures, or closer-than-expected congressional races.”

With the political map glaringly free of obvious near-term win opportunities, Schatz believes the party’s messaging needs some refining. In his view, that means officials at the DCCC should cut the doom-and-gloom messaging in their fundraising emails — a significant way the party communicates with backers.

“I don’t mind the occasional call to action that is based on a negative emotion, it’s the declaring final defeat at the start of the third quarter that bugs me. ‘All is lost’ is a preposterous thing to say to a voter or a donor, and to use words like ‘crushing’ is a total misunderstanding of how to motivate people,” he said on Tuesday, just hours before the DCCC sent out a Nancy Pelosi-signed note with the subject line "crushing loss."

“The point to be made here is this is Tom Price’s seat,” he added. "One of the most conservative people in the United States House. And when he vacated his seat nobody thought it was going to be a problem for national Republicans and competitive for us. So if we can keep up this competitiveness, it’s going to be a really interesting year in 2018. But if we define our success as winning in Kansas, Montana, and Georgia, we’re setting ourselves up for potential disappointment.”

Article Link To Politico:

Markets Start To Ponder The $13 Trillion Gorilla In The Room

Fed officials discuss when to start reducing asset holdings; If global economy continues to improve ECB and BOJ may be next.

By Enda Curran, Liz McCormick, and Eric Lam
April 19, 2017

After heading into the uncharted territory of quantitative easing, the world’s central banks are starting to plan their course through the uncharted waters of quantitative tightening.

How the Federal Reserve, European Central Bank and -- eventually -- the Bank of Japan handle the transition could make the difference between a global rerun of the 2013 "taper tantrum," or the near undetectable market response to China’s run-down of U.S. Treasuries in recent years. Combined, the balance sheets of the three now total about $13 trillion, equating to greater than either China’s or the euro region’s economy.

Former Fed Chair Ben S. Bernanke -- who triggered the 2013 sell-off in risk assets with his quip on tapering asset purchases -- has argued for a pre-set strategy to shrink the balance sheet. Current Vice Chairman Stanley Fischer says he doesn’t see a replay of the 2013 tantrum, but the best laid plans of central bankers would soon go awry if markets can’t digest the great unwinding.

"You know what they say about mountaineering right? The descent is always more dangerous than the ascent," said Stephen Jen, London-based chief executive of hedge fund Eurizon SLJ Capital Ltd. "Shrinking the balance sheet will be the descent."

Economists and investors are stepping up analysis of the implications of balance-sheet contraction after minutes of the Federal Open Market Committee meeting last month showed officials favor kicking off the process as soon as this year.

While the BOJ appears to be some distance from shrinking its balance sheet, Governor Haruhiko Kuroda has said that’s one of the tasks the BOJ will face when it exits its monetary easing policies. That would only be after inflation exceeds 2 percent, which the BOJ forecasts will come sometime in the year starting April 2018.

The ECB’s balance sheet will continue to grow until at least the end of this year and isn’t likely to shrink until well after it finally winds down asset purchases. Any discussion on when to start shrinking appears to be some distance away.

A key unknown is how the heavily indebted global economy can cope with the rising interest rates that are likely to result from stimulus withdrawal. As central banks squeeze their balance sheets, they will add selling pressure on longer-dated bonds and effectively push up borrowing costs. Getting the balance right won’t be easy.

"In practice, the FOMC will probably have to determine the appropriate terminal level" of the balance sheet "through experience and observation of market functioning as it gradually shrinks," David Mericle, an economist at Goldman Sachs Group Inc., wrote in a recent note.

All three main central banks in the largest developed economies used government bonds as a major avenue for monetary expansion. The Fed also accumulated almost one-quarter of the mortgage bonds sold by government-linked agencies over the last year.

Underscoring just how diverse the programs have become, the ECB’s securities purchases have included French yogurt-maker bonds, while the BOJ’s holdings through exchange traded funds include shares of Japan’s top soy-sauce brewer.

Fed officials’ current game plan is to start the balance-sheet run-down with a phasing out of reinvestment in maturing securities. The central bank will have $426 billion of its Treasuries mature in 2018 and another $357 billion in 2019. "If the Fed tapers reinvestments, the market will have to find a way to absorb the additional supply," Societe Generale SA analysts led by Brigitte Richard-Hidden wrote in a recent note.

Bernanke in January laid out the case for a permanently large balance sheet, arguing in part that this is needed to ensure the effectiveness of monetary policy decisions. The argument is that it’s easier for the Fed to raise and lower borrowing costs using the rate it pays commercial banks for their reserves than it would be to return to the pre-crisis days of adding or subtracting marginal amounts of funds in the overnight interbank market.

Wild Card

A wild card is the potential overhaul of the Fed board that’s open to President Donald Trump. With Janet Yellen’s term as chair due in February, and three board-member nominations pending, the Trump administration has the scope to affect the balance-sheet strategy. While Trump has told the Wall Street Journal he is open to renominating Yellen, some Republicans have encouraged an exit from credit markets, raising the risk for volatility.

How markets react could also affect the outlook for the Fed’s benchmark overnight rate target, according to Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. He notes that during the 2013 taper tantrum, 10-year Treasury yields climbed over 3 percent from about 1.6 percent before Bernanke signaled a phasing-out of asset purchases.

"The Fed will attempt to avoid a repeat of the taper tantrum by thoroughly preparing the markets before starting to cut its balance sheet," LaVorgna predicted.

In a speech prepared for delivery at Columbia University in New York on Monday, Fischer said that the muted response of investors so far to the emerging details of the plan suggests that the out-sized financial market moves seen four years ago probably will be avoided.

As for euro area officials, when they turn to balance-sheet contraction they may have less to debate because the ECB’s balance sheet before the crisis was already much bigger relative to the size of the economy than the Fed’s. That stems from its much greater role in providing liquidity to banks on a regular basis.

The impact of an ECB phase-out of asset purchases could have knock-on effects outside of Europe, illustrating again the potential for unintended consequences from unorthodox monetary actions. European investors took money out of the euro area at a record pace to escape the negative yields resulting from ECB policy, and much of that went into Treasuries. That leaves the U.S. government bond market potentially facing a double whammy from both ECB and Fed balance-sheet contraction in coming years.

When it comes to Japan, the country where modern-era QE began in 2001, the BOJ’s balance sheet is currently set to continue swelling given its target for asset purchases of about 80 trillion yen ($737 billion) a year. With policy makers having adopted a specific strategy of targeting government bond yields, the prospects for major volatility are slim in that market.

The bigger risk for investors lies in any phasing out of purchases of stocks and real-estate investment trusts, where the BOJ has come to play a large role.

If the BOJ did come to the point of seeking an exit from its risk-asset investments, there’s a template for disposal from an Asian neighbor. The Hong Kong Monetary Authority took the extraordinary step of buying more than 7 percent of the benchmark Hang Seng Index in August 1998 during the throes of the Asian financial crisis. As soon as the next year, it began to implement a disposal plan once the turmoil had passed.

HKMA officials came up with a tracker fund of Hong Kong shares, composed of the central bank’s holdings, then sold it in batches over a period of years. With the BOJ’s holdings already mainly in the form of exchange-traded funds, it could be even easier. The Japanese government’s pension fund has also been a ready buyer of Japanese shares, offering a potentially market-friendly solution.

Still, care will be needed.

"Central banks need to be very cautious in starting to run down their balance sheets," said Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney. "They need to reiterate that it’s conditional on continued economic improvement, that it will be gradual and that it could be a substitute at times for rate hikes."

Article Link To Bloomberg:

Don't Panic Yet About U.S. Consumers' Latest First-Quarter Slump

Watch softening car sales, gap between sentiment and spending; Transitory drags include low heating bills, tax-refund delays.

By Sho Chandra
April 19, 2017

Don’t hit the panic button over another first-quarter slump in U.S. consumer spending. At least not yet.

In each of the past three years, household purchases slowed in the January-to-March period, only to rebound and continue powering the world’s largest economy. While that pattern is projected to repeat in 2017, there may be less ounce to the bounce this time.

Consumption grew at a 1.1 percent annualized rate, down from 3.5 percent in the fourth quarter, according to the median estimate of economists surveyed by Bloomberg this month. If confirmed in data due April 28, it would be the weakest gain in almost four years and the worst first quarter of the expansion that began in 2009.

Some of the slowdown can be chalked up to temporary factors, such as unseasonable weather, and delays in tax refunds for some filers. Yet a leveling-off in automobile sales, along with the possibility sentiment may waver from elevated levels and cause shoppers to become even more cautious, loom as risks that any rebound will be less pronounced than prior years. On top of that, consumer prices are rising at the fastest pace in five years, eating into purchasing power amid tepid wage gains.

“Whichever way you slice it, first-quarter consumer spending was weak,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York. “I don’t think the trend is quite that weak,” he added, but with auto sales slowing and inflation rising, there will be “some moderation.”

He expects the pace of growth in household purchases will settle into a 2 percent to 2.5 percent range, compared with around 3 percent last year. Economists project a second-quarter acceleration to a 2.8 percent annualized rate, and a gain of 2.5 percent for the full year, according to the monthly Bloomberg survey conducted from April 7 to April 12.

Weather Impact

For the first quarter, weather was a familiar, but temporary culprit. Unseasonably warm temperatures kept home-heating bills low and depressed spending on utilities in January and February to the weakest two-month stretch in more than 25 years, while a late winter storm in the Northeast crimped consumer purchases in March.

Delayed tax refunds were another negative, though household spending may pick up as the cash makes its way to Americans’ pockets.

The hit from a downshift in motor vehicle purchases could prove more than temporary, though. Bigger buyer incentives and falling prices may shore up demand, while a pullback in subprime auto lending will damp sales.

Meanwhile, optimism is still riding high that President Donald Trump will deliver on his pledges to cut taxes, renegotiate trade agreements and invest in infrastructure. That’s another reason why the consumer slowdown matters -- the stark divide between household sentiment and actual performance contrasts with business activity, which has begun catching up to elevated corporate confidence.

The weakness in consumer spending, which accounts for about 70 percent of the economy, also means dismal first-quarter forecasts for gross domestic product growth. The Bloomberg survey median calls for a 1.5 percent annualized gain. The Atlanta Fed’s GDPNow model estimates a 0.5 percent advance.

Nonetheless, a recent report showing back-to-back declines in monthly retail sales wasn’t all bad news. So-called control-group sales, which are used to calculate GDP and exclude food services, auto dealers, building materials outlets and gasoline stations, rose at a 4.1 percent annualized rate for the first three months of 2017, up from 3.8 percent at the end of 2016.

Besides, consumers have the benefit of a tightening job market, healthier finances and still-low borrowing costs.

As economists at BMO Capital Markets wrote in a note, given these still supportive demand fundamentals, “we don’t expect the workhorse of the expansion, consumers, are headed for the pasture given just yet.”

Article Link To Bloomberg:

President Trump Should Run, Not Walk, Away From The Paris Climate Treaty

The Paris Climate Treaty is a heat-seeking missile aimed solely at American jobs that will do nothing to reduce global warming. Why would we deploy it?

By Joseph Bast
The Federalist
April 19, 2017

Top officials in the Trump administration apparently are debating whether to withdraw from the Paris Climate Treaty, an agreement negotiated in the waning years of the Obama administration that would commit the United States to reducing its greenhouse gas emissions by 26 to 28 percent relative to 2005 levels by the year 2025.

The Heartland Institute has been studying climate change for nearly two decades. Our advice to the Trump administration is simple: Run, don’t walk, away from the Paris Climate Treaty! Here are our reasons for this recommendation. Sources for our statements are readily found here and here.

There Is No Scientific Basis For The Paris Climate Treaty

The Paris Climate Treaty is supposedly an attempt to keep global temperatures from increasing 2 degrees C, but this objective is based on political science, not climate science.

The goal is an arbitrary political target based on climate activists’ demands for a number, no matter how dubious or fake, to use in their fundraising letters and to appear on their signs at protests. There is no scientific evidence suggesting a warming of 1.9 degrees C is safe while 2.1 degrees C is not safe.

Climate models that forecast temperature increases of more than 1 or 2 degrees during the next century are not scientific. They flunk the objective requirements of scientific forecasting. They are educated guesses by activists whose credibility and livelihood depend on showing ever-increasing certainty of impending doom, even as their data point in the opposite direction.

Climate models have greatly overestimated warming over the past two decades. The models have not matched observed temperatures from satellites, the only truly global and accurate way we have of measuring Earth’s temperature. Why should we imagine their forecasts of climate conditions 100 years from now and beyond are accurate?

Carbon dioxide is not a pollutant. More CO2 leads to faster, more robust plant growth, including staple food crops. Moderate warming, should it occur, would have a positive effect on humanity, since lower temperatures kill far more people than do warmer temperatures, and warming historically has been associated with economic growth, global peace, and prosperity.

The Paris Climate Agreement Puts America Last

The Paris Climate Agreement would require the United States to make massive reductions in emissions and pay billions of dollars in “climate reparations” to Third World dictators, while requiring no emission cuts from developing countries including India and China.

China’s only commitment in the Paris agreement is agreeing to reach peak carbon dioxide emissions “around 2030” and reducing emissions per unit of gross domestic product by 60 to 65 percent by that time from their 2005 level. This agreement is a gift to Chinese manufacturers and a slap in the face of American industry.

There is simply no justification for the United States to pay hundreds of billions of dollars to developing countries at a time when the U.S. government is running massive deficits, when economic growth is slower for a longer period of time than at any time since the Great Depression, and when American workers are competing against lower-paid workers in China and India.

Other countries are already failing to keep their pledges to help finance the United Nations Climate Fund, which means the United States will be asked to contribute even more money to make up the difference. Other countries are simply relabeling foreign aid to count toward their goals. And China will use the failure to fund the programs as “political cover” to continue to ignore its own climate targets.

The Paris Climate Treaty Is A Job Killer

Low coal, oil, and natural gas prices have fueled nearly all the economic growth that occurred during the Obama years. If Obama-era restrictions on developing natural resources are lifted, billions of dollars more in manufacturing investment in the United States will occur and millions of new jobs will be created.

Conversely, staying in the Paris Climate Treaty would mean increasing electricity prices and compromising the reliability of our electrical grid, which would drive manufacturing out of Midwestern states like Indiana, Ohio, Pennsylvania, and Wisconsin to developing countries where coal and natural gas are still allowed.

The Paris Climate Treaty requires that the United States ratchet down its emissions every five years, despite economic growth, population growth, and opportunities to become a net energy exporter to the world. Every year, thousands more miners, drillers, engineers, pipeline workers, auto plant workers, and truck drivers would lose their jobs. The Paris Climate Treaty is a heat-seeking missile aimed solely at American jobs. Why would we do that?

What We Should Do Instead

The fastest, most efficient way to remove the United States from the Paris Climate Treaty is to withdraw from the United Nations Framework Convention on Climate Change (UNFCCC), negotiated in 1992. Doing so would keep President Trump’s promise to defund the United Nations’ global warming projects, and it could be done in one year rather than the four years required to withdraw from the Paris treaty. Withdrawal from the UNFCCC would automatically mean leaving the Paris treaty.

If President Trump does not withdraw the United States from the Paris Climate Treaty and, even better, from the UNFCCC, then the leaders of other countries will use the treaties as a huge stick with which to beat U.S. consumers and producers. American independence and prosperity—and greatness—will be impossible. The American people, and the middle class in particular, will once again have been betrayed by the political class in Washington DC.

The Paris Climate Treaty empowers enemies of American greatness at home, too. A future administration could use the treaty, just as the Obama administration began to do, to justify policies that transfer billions of dollars to Third World dictators, cripple the American economy, and hurt American workers. President Trump should fully withdraw the United States from the Paris Climate Treaty and, better yet, from the UN Framework Convention on Climate Change.

Article Link To The Federalist:

President Trump Should Run, Not Walk, Away From The Paris Climate Treaty

Baidu To Launch Self-Driving Car Technology In July

April 19, 2017

Baidu Inc (BIDU.O) said on Tuesday it would launch its self-driving car technology for restricted environment in July before gradually introducing fully autonomous driving capabilities on highways and open city roads by 2020.

The project is named Apollo after the lunar landing program, the Chinese search giant said, adding it would work with partners who provide vehicles, sensors and other components for the new technology.

As part of its push into artificial intelligence (AI), the company in January named former Microsoft Corp (MSFT.O) executive Qi Lu as chief operating officer.

Two months after the appointment, Baidu's chief scientist Andrew Ng, who led AI and augmented reality (AR) projects, said he would step down.

The company also launched a $200 million fund in October to focus on AI, AR and deep learning, followed by a $3 billion fund announced in September to target mid- and late- stage start-ups.

"AI has great potential to drive social development, and one of AI's biggest opportunities is intelligent vehicles," Qi said in a statement.

In November, Baidu and German automaker BMW AG (BMWG.DE) said they would end their joint research on self-driving cars due to differences in opinion on how to proceed.

Technology and automotive leaders contend that cars of the future will be capable of completely driving themselves, revolutionizing the transportation industry, with virtually all carmakers as well as companies such as Alphabet's Google (GOOGL.O) and parts supplier Delphi (DLPH.N) investing heavily in developing the technology.

Article Link To Reuters:

Mnuchin: Trump 'Absolutely Not' Trying To Talk Down Dollar

April 19, 2017

U.S. President Donald Trump is "absolutely not" trying to talk down the strength of the U.S. dollar, Treasury Secretary Steven Mnuchin was quoted as saying in Wednesday's edition of the Financial Times.

Mnuchin's remarks build on those first published in an interview with the FT late on Monday, in which he played down remarks by Trump in a Wall Street Journal interview last week when he said the dollar was "getting too strong".

Asked if Trump's remarks to the WSJ were an attempt to talk down the dollar, Mnuchin was quoted in Wednesday's FT as saying "absolutely not, absolutely not".

Article Link To Reuters:

Climbing Out Of Facebook's Reality Hole

By Mat Honan
April 19, 2017

It is spring in California and the rains have finally returned after years of absence. The grass is green, the hillsides are coated in yellow and orange and blue flowers, and the reservoirs are full again, hallelujah. Yet while the spring rains may have washed away the drought, they have done nothing to alleviate the sense of existential dread — especially pervasive here in the techno-utopia of California —that the world we built has perhaps gone badly awry.

The proliferation of fake news and filter bubbles across the platforms meant to connect us have instead divided us into tribes, skilled in the arts of abuse and harassment. Tools meant for showing the world as it happens have been harnessed to broadcast murders, rapes, suicides, and even torture. Even physics have betrayed us! For the first time in a generation, there is talk that the United States could descend into a nuclear war. And in Silicon Valley, the zeitgeist is one of melancholy, frustration, and even regret — except for Mark Zuckerberg, who appears to be in an absolutely great mood.

The Facebook CEO took the stage at the company's annual F8 developers conference a little more than an hour after news broke that the so-called Facebook Killer had killed himself. But if you were expecting a somber mood, it wasn't happening. Instead, he kicked off his keynote with a series of jokes.

It was a stark disconnect with the reality outside, where the story of the hour concerned a man who had used Facebook to publicize a murder, and threaten many more. People used to talk about Steve Jobs and Apple's reality distortion field. But Facebook, it sometimes feels, exists in a reality hole. The company doesn't distort reality — but it often seems to lack the ability to recognize it.

The problem with connecting everyone on the planet is that a lot of people are assholes. The issue with giving just anyone the ability to live broadcast to a billion people is that someone will use it to shoot up a school. You have to plan for these things. You have to build for the reality we live in, not the one we hope to create.

While Zuckerberg has charted a statesmanlike evolution over the years, he and the company he helms too often have a blind spot for the way the world will react to products it unleashes on them. Certainly, that seemed the case at F8 today where a slightly rain-soaked audience groaned through Zuckerberg's dad jokes and listened in anticipation as he teased what was to come. Then, abruptly, he shifted gears.

"Our hearts go out to the family and friends of Robert Godwin Sr.," Zuckerberg said, referring to the 74-year-old victim. "We have a lot of work and we will keep doing all we can to prevent tragedies like this from happening." Then, as quickly as he hit the somber tone, Zuckerberg returned to platform optimism.

Today's news was largely about the company's push into AR — augmented reality. Think: digital layers we can place atop the real world. Facebook says there will be three main ways this will play out: the ability to display information on top of the world in front of you, the ability to add digital objects, and the ability to enhance or alter existing objects.

Executive after executive took the F8 stage to show off how these effects will manifest themselves in the real world. Deborah Liu, who runs Facebook's monetization efforts, encouraged the audience to "imagine all the possibilities" as she ran through demos of a café where people could leave Yelp-style ratings tacked up in the air and discoverable with a phone, or a birthday message she generated on top of an image of her daughter, while noting that with digital effects, "I can make her birthday even more meaningful."

And yet the dark human history of forever makes it certain that people will also use these same tools to attack and abuse and harass and lie. They will leave bogus reviews of restaurants to which they've never been, attacking pizzerias for pedophilia. If anyone can create a mask, some people will inevitably create ones that are hateful.

"With augmented reality," Zuckerberg said, "you're going to be able to create and discover all sorts of new art around your city." Yes, someone can create a virtual painting, meant to beautify the city, or leave a virtual note to a loved one that reaches them at just the right moment, in just the right place. But someone else will probably leave a swastika. Because if there is anything to be learned about the modern internet, it is that if you build it, the Nazis will come.

But Facebook made no nods to this during its keynote — and realistically maybe it's naive to expect the company to do so. But it would be reassuring to know that Facebook is at least thinking about the world as it is, that it is planning for humans to be humans in all their brutish ways. A simple "we're already considering ways people can and will abuse these tools and you can trust us to stay on top of that" would go a long way.

Instead Facebook went into the reality hole. It touted Facebook Spaces, a new social virtual reality thing that helps you escape the world while experiencing it, too. As Rachel Rubin Franklin, who used to be executive producer of Electronic Arts' "The Sims" game and now runs Facebook's social VR efforts, said of Spaces: "When your friends and family join your space, it's just like really being together."

But it is not. Your avatar is not human, no matter how real it looks. The digital world is not flesh or blood, but it can have a tremendous effect on things that are.

When Facebook announced live video almost exactly one year ago, Zuckerberg touted its ability to tap into the raw and visceral moments of life. But it didn't take long for those moments to become too raw, and too visceral. When Zuckerberg released a 6,000 word open letter in February, and sought to overtly inject values into the company's mission, he said he had been moved by a suicide broadcast on Facebook Live. But of course, the suicides keep happening. Facebook can't stop this, of course, any more than it can stop murder or mayhem or death.

But the company can acknowledge that these things will happen, and it can do a far better job of planning for them. It can make it harder to use its platforms to harass others, or to spread disinformation, or to glorify acts of violence and destruction. As it rolls out this slew of new tools to augment reality, here's hoping that Facebook will also climb out of its reality hole and face the world we actually live in.

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Despite Brexit, Theresa May Ready To Lead Europe

Snap election in June could give U.K. leverage for a better Brexit deal.

By David Marsh
April 19, 2017

Theresa May, bolstered by opinion polls that seemed too good to be true, has thrown caution to the wind and decided she wishes to lead Europe. The erstwhile careful campaigner to keep Britain in the European Union, who has — since becoming prime minister last July — fully espoused the “U.K. out” cause, has now undergone a further metamorphosis.

For weeks, May has been ruling out an election. Now she has changed her mind. Yesterday’s surprise decision, kept secret from most of her cabinet until Tuesday morning, to call a snap poll on June 8 should endear herself to President Donald Trump — a risk-taker who is not averse to altering his opinion when circumstances change.

Both sterling GBPUSD, -0.0623% and the dollar BUXX, +0.21% look like strong currencies in coming weeks against a weaker euro EURUSD, -0.1025% .

May’s stage-managed transformation is to become, by an exceptional margin, a substantial election victor, crush the opposition Labour Party, and gain a strong mandate to shepherd the U.K. to a reasonable economic and political exit deal with the remaining EU states. The Conservative Party is an unusual 20 percentage points ahead in the polls over luckless and semi-leaderless Labour.

Unless something catastrophic happens, May in June will swap her present unelected status for the prize mantle of the sole top European leader with sizable popular backing for her policies.

With France facing instability, whoever finishes first in the French presidential elections culminating on May 7, and with Chancellor Angela Merkel mounting a difficult struggle in Germany’s September elections, May will be able to bask in unusual acclaim. She hopes envious glances from her European peers will be translated into negotiating leverage that will give the U.K. clear benefits in a relatively smooth and “soft” withdrawal agreement taking effect in 2019.

By calling the election — requiring careful political engineering in view of Britain’s fixed-term parliamentary system — May has every chance of establishing Britain, from June 9 onwards, as an island of relative stability in another otherwise uncertain continent.

The Franco-German relationship, and with that the future make-up of Europe, seems headed for the most problematic passage since 1945.

In June France will be in the throes of parliamentary elections designed to give legitimacy to whoever becomes French president after May 7 — Emmanuel Macron, François Fillon or Marine Le Pen. Whoever it is will struggle to gain firm backing in the National Assembly and a messy “cohabitation” of disruptive political bickering is likely to ensure.

Financial markets will have to get used to spread between German and French bonds continuing semi-permanently above the 60 basis points margin of the last few weeks.

The dollar has fallen back as perceptions gain ground that its three-year run of strength may undermine some key tenets of President Donald Trump’s economic program. But, in an unprecedentedly tight and fluctuating French presidential race among exceptionally diverse leading candidates, shocks cannot be excluded that would knock the euro against the dollar and all other leading currencies including the yen EURJPY, +0.36% , sterling EURGBP, -0.0479% and EURCNY, -0.0271%

May’s move yesterday already sent sterling stronger.

May and her advisers had argued strongly in recent weeks against holding an early election. They pointed to her ability to govern effectively with a working majority in the House of Commons inherited from David Cameron, her predecessor, who resigned immediately after the U.K. voted to leave the EU on June 23.

In addition the government had argued that an early poll would represent a distraction from Brexit talks. And May undeniably has enjoyed a series of easy victories against Jeremy Corbyn, the hapless Labour leader.

Against this, the prime minister has now clearly been swayed by a series of counter arguments calling for upending the status quo. A latest batch of highly favorable opinion polls seems to have clinched the decision. Apart from the potential European benefits, she has the chance of upstaging Brexiteer hardliners in her party who, although at present quiescent, represent a potential threat. She can erase the continued irritant of the U.K. Independence Party, now seen to have outlived its usefulness, and score some useful wins against the Scottish Nationalists north of the border.

This is not the first surprise in the Brexit saga. Cameron didn’t expect to lose the June referendum and said he would stay on if he did. The Leave side did not expect to win and had no prepared leadership plan. Financial markets and economists of all persuasions expected to U.K. economy to dip after the result — it still hasn’t happened.

May now has the chance to show that she can turn successive surprises to her advantage. For the time being, at least, it looks like a successful strategy.

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